REVIEW OF MEDICARE CLAIMS FOR AIR AMBULANCE SERVICES PAID TO NATIVE AMERICAN AIR AMBULANCE

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3 Department of Health and Human Services OFFICE OF INSPECTOR GENERAL REVIEW OF MEDICARE CLAIMS FOR AIR AMBULANCE SERVICES PAID TO NATIVE AMERICAN AIR AMBULANCE Daniel R. Levinson Inspector General JULY 2005 A

4 Office of Inspector General The mission of the Office of Inspector General (OIG), as mandated by Public Law , as amended, is to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the health and welfare of beneficiaries served by those programs. This statutory mission is carried out through a nationwide network of audits, investigations, and inspections conducted by the following operating components: Office of Audit Services OIG s Office of Audit Services (OAS) provides all auditing services for HHS, either by conducting audits with its own audit resources or by overseeing audit work done by others. Audits examine the performance of HHS programs and/or its grantees and contractors in carrying out their respective responsibilities and are intended to provide independent assessments of HHS programs and operations in order to reduce waste, abuse, and mismanagement and to promote economy and efficiency throughout HHS. Office of Evaluation and Inspections OIG s Office of Evaluation and Inspections (OEI) conducts short-term management and program evaluations (called inspections) that focus on issues of concern to HHS, the Congress, and the public. The findings and recommendations contained in the inspections reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, and effectiveness of departmental programs. OEI also oversees State Medicaid fraud control units, which investigate and prosecute fraud and patient abuse in the Medicaid program. Office of Investigations OIG s Office of Investigations (OI) conducts criminal, civil, and administrative investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment by providers. The investigative efforts of OI lead to criminal convictions, administrative sanctions, or civil monetary penalties. Office of Counsel to the Inspector General The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering advice and opinions on HHS programs and operations and providing all legal support in OIG s internal operations. OCIG imposes program exclusions and civil monetary penalties on health care providers and litigates those actions within HHS. OCIG also represents OIG in the global settlement of cases arising under the Civil False Claims Act, develops and monitors corporate integrity agreements, develops compliance program guidances, renders advisory opinions on OIG sanctions to the health care community, and issues fraud alerts and other industry guidance.

5 Notices THIS REPORT IS AVAILABLE TO THE PUBLIC at In accordance with the principles of the Freedom of Information Act (5 U.S.C. 552, as amended by Public Law ), Office of Inspector General, Office of Audit Services reports are made available to members of the public to the extent the information is not subject to exemptions in the act. (See 45 CFR Part 5.) OAS FINDINGS AND OPINIONS The designation of financial or management practices as questionable or a recommendation for the disallowance of costs incurred or claimed, as well as other conclusions and recommendations in this report, represent the findings and opinions of the HHS/OIG/OAS. Authorized officials of the HHS divisions will make final determination on these matters.

6 EXECUTIVE SUMMARY BACKGROUND The Medicare program, established by Title XVIII of the Social Security Act in 1965, provides health insurance coverage to people age 65 and over, the disabled, and people with end-stage renal disease. The Centers for Medicare & Medicaid Services (CMS) contracts with carriers for the administration of Medicare Part B. Part B covers a multitude of medical and other health services, including air ambulance services. Air ambulance services are provided by either a fixed wing (airplane) or rotary wing (helicopter) aircraft when the patient s medical condition requires immediate and rapid ambulance transportation that cannot be provided by ground ambulance. Medicare requires air ambulance suppliers to: document the medical necessity and appropriateness of services billed, transport patients to an acute care hospital for services, transport patients to the nearest acute care hospital with appropriate facilities, calculate mileage correctly, and submit a claim first to the primary payer when Medicare is the secondary payer and refund any Medicare payment for the services paid by another primary payer (Medicare secondary payer overpayments). For calendar year (CY) 2002, Native American Air Ambulance (Native Air) received $3,968,759 in Medicare payments for 1,219 air ambulance claims. Native Air is a privately held corporation, providing air medical transport services by airplane and helicopter in Arizona. OBJECTIVE Our objective was to determine whether Native Air claimed air ambulance services for CY 2002 pursuant to Medicare billing requirements. SUMMARY OF FINDINGS Contrary to Medicare billing requirements, Native Air improperly claimed air ambulance services. Of our random sample of 100 claims, 15 claims were improper: 1 claim was for a medically inappropriate service (transporting the patient by air ambulance when a ground ambulance would have sufficed), and 14 claims were for transporting patients beyond the nearest hospital with appropriate facilities. i

7 As a result, $10,589 of the $330,713 reviewed was unallowable. Projecting the results of the unrestricted random sample to the population, we are 95-percent confident that at least $62,408 of the $3,968,759 paid to Native Air for air ambulance claims was unallowable for Medicare reimbursement. These overpayments occurred because Native Air did not ensure that: only medically appropriate air transport was billed to Medicare, and air transport was billed for the mileage to the nearest hospital with appropriate facilities and documentation in the medical records supported the reason for transporting patients beyond the nearest hospital with appropriate facilities. RECOMMENDATIONS We recommend that Native Air: refund to the Medicare program $62,408 in overpayments for air ambulance services, strengthen policies and procedures to ensure that only medically appropriate air transport services are billed to Medicare, and strengthen policies and procedures to ensure that air transport services are billed for the mileage to the nearest hospital with appropriate facilities and that documentation in the medical records supports the reason for transporting patients beyond the nearest hospital with appropriate facilities. NATIVE AIR S COMMENTS In written comments on our draft report, Native Air disagreed with our findings and the procedural recommendations. It did not comment on the recommendation for a refund of $62,408. It stated that the physician determined the medical appropriateness of air transport, and Native Air was not in a position to look behind the physician s decision to determine whether, in fact, the transport was medically necessary. Further, it relied on the medical judgment of the physician or other trained personnel that the receiving facility was the closest appropriate facility to provide the necessary care. Finally, Native Air stated that it established controls in CY 2003 to address the issues identified in our audit. The full text of Native Air s comments is included as an appendix. OFFICE OF INSPECTOR GENERAL S RESPONSE We based our findings and recommendations on the Medicare billing requirements for air ambulance services and the medical reviews performed by Noridian Administrative Services, LLC (Noridian), the Medicare Part B carrier for Native Air. The medical reviewers evaluated Native Air s documentation and determined that the air transport was not medically appropriate and that patients should have been transported to a closer hospital with appropriate facilities. Because we reviewed Medicare claims for air ambulance services provided during CY 2002, we did not review the policies and procedures developed in CY ii

8 TABLE OF CONTENTS Page INTRODUCTION... 1 BACKGROUND... 1 Medicare Program Air Ambulance Services... 1 Medicare Billing Requirements for Air Ambulance Services.. 1 Native Air. 1 OBJECTIVE, SCOPE, AND METHODOLOGY 1 Objective... 1 Scope. 2 Methodology. 2 FINDINGS AND RECOMMENDATIONS.. 3 MEDICALLY INAPPROPRIATE AIR AMBULANCE SERVICE 4 Medicare Billing Requirements. 4 Air Transport Not Required... 4 PATIENTS TRANSPORTED BEYOND THE NEAREST HOSPITAL WITH APPROPRIATE FACILITIES.. 4 Medicare Billing Requirements. 4 Patients Not Transported to Nearest Hospital LACK OF ADEQUATE CONTROLS.. 5 CONCLUSION.. 6 RECOMMENDATIONS... 6 NATIVE AIR S COMMENTS AND OFFICE OF INSPECTOR GENERAL S RESPONSE APPENDIXES A SAMPLE RESULTS AND PROJECTION B NATIVE AIR FORM FOR DOCUMENTATION OF MEDICAL NECESSITY C NATIVE AIR S COMMENTS ON DRAFT REPORT iii

9 INTRODUCTION BACKGROUND Medicare Program The Medicare program, established by Title XVIII of the Social Security Act in 1965, provides health insurance coverage to people age 65 and over, the disabled, and people with end-stage renal disease. Administered by CMS within the Department of Health and Human Services, the program consists of four parts, including Part B Supplemental Medical Insurance. Part B covers a multitude of medical and other health services, including air ambulance services. Part B claims are processed by carriers, which are CMS contractors. Noridian is the Medicare carrier for beneficiaries residing in Arizona. Air Ambulance Services Medicare reimburses air ambulance suppliers for: airplane or helicopter ambulance transport service, one way; and airplane or helicopter mileage. Medicare Billing Requirements for Air Ambulance Services To be covered by Medicare, ambulance services must be medically necessary and reasonable. The patient s condition should be such that use of any other method of transportation would endanger the patient s health. Air ambulance services also must be medically appropriate. The patient s condition should be such that transportation by either basic or advanced life support ground ambulance would pose a threat to the patient s survival or seriously endanger the patient s health. Native Air Native Air is a privately held corporation, which has provided airplane and helicopter medical transport services in Arizona since August Its main office is located in Mesa, AZ. OBJECTIVE, SCOPE, AND METHODOLOGY Objective Our objective was to determine whether Native Air claimed air ambulance services for CY 2002 pursuant to Medicare billing requirements. 1

10 Scope As part of an Office of Inspector General nationwide review of air ambulance services, we selected the air ambulance supplier that received the highest amount of Medicare payments in Arizona. Native Air received $3,968,759 in Medicare payments for 1,219 air ambulance claims for CY We reviewed a random sample of 100 claims (a claim consisted of an air ambulance transport service and related air mileage) to determine whether Native Air: documented services for medical necessity and appropriateness, transported patients to an acute care hospital for services, transported patients to the nearest acute care hospital with appropriate facilities, calculated and billed mileage correctly, and received Medicare secondary payer overpayments. We did not assess the overall internal control structure of Native Air. We limited our internal control review to obtaining an understanding of controls over the submission of claims to Medicare for air ambulance services. We performed our review from April through October 2004 and conducted fieldwork at Native Air in Mesa, AZ, and Noridian in Fargo, ND. Methodology To accomplish the objective, we: reviewed applicable Federal regulations and Medicare requirements; identified the population of Medicare claims for CY 2002 air ambulance services paid to Native Air, using Medicare claims data from CMS s program safeguard contractor, Western Integrity Center; selected a random sample of 100 Medicare claims for air ambulance services; obtained medical records, patient account ledgers, insurance verification forms, and other claim-related information from Native Air for all 100 claims; obtained medical records from the pickup and destination facilities for certain claims; obtained documents related to Medicare appeal and hearing processes for certain claims; used medical review staff from Noridian to evaluate the 100 claims; 2

11 obtained the air mileage chart used by Noridian during CY 2002 to determine the appropriate mileage between the pickup and destination facilities; obtained Medicare Common Working File data for all 100 claims to confirm that the patients were transported to an acute care hospital for services; reviewed Native Air s policies and procedures for billing Medicare for air ambulance services; interviewed Native Air officials to obtain an understanding of the Medicare billing processes for air ambulance services; and used a variable unrestricted appraisal program to estimate the dollar impact of overpayments identified in the population. Details of our statistical sampling methodology are presented in Appendix A. We conducted our review in accordance with generally accepted government auditing standards. FINDINGS AND RECOMMENDATIONS Contrary to Medicare billing requirements, Native Air improperly claimed air ambulance services in CY Of our random sample of 100 claims, 15 claims were improper: 1 claim was for a medically inappropriate service (transporting the patient by air ambulance when a ground ambulance would have sufficed), and 14 claims were for transporting patients beyond the nearest hospital with appropriate facilities. As a result, $10,589 of the $330,713 reviewed was unallowable. Projecting the results of the unrestricted random sample to the population, we are 95-percent confident that at least $62,408 of the $3,968,759 paid to Native Air for air ambulance claims was unallowable for Medicare reimbursement. These overpayments occurred because Native Air did not ensure that: only medically appropriate air transport was billed to Medicare, and air transport was billed for the mileage to the nearest hospital with appropriate facilities and documentation in the medical records supported the reason for transporting patients beyond the nearest hospital with appropriate facilities. 3

12 MEDICALLY INAPPROPRIATE AIR AMBULANCE SERVICE Medicare Billing Requirements The Medicare Benefit Policy Manual, chapter 10.4, states that medically appropriate air ambulance services are covered only if the patient s condition is such that transportation by either basic or advanced life support ground ambulance is not appropriate. Specifically, chapter of the manual states, Medical appropriateness is only established when the beneficiary s condition is such that the time needed to transport a beneficiary by ground, or the instability of transportation by ground, poses a threat to the beneficiary s survival or seriously endangers the beneficiary s health. Chapter of the manual states that suppliers, when requested by the carrier to substantiate medical appropriateness, should provide documentation indicating that the air ambulance service was reasonable and necessary to treat the patient s life-threatening condition. In addition, section G of the Medicare Carriers Manual states that payment for the air ambulance service should be based on the amount payable for ground transport if a determination is made that ground ambulance service would have sufficed. Air Transport Not Required Native Air submitted one claim containing a medically inappropriate air ambulance service when a ground ambulance would have sufficed. The air transport service had related mileage of 186 miles, the distance from a hospital in Polacca, AZ, to a hospital in Phoenix, AZ. Before our review, Noridian determined that the air transport was not medically appropriate and allowed the transport service and related mileage at ground ambulance rates. Further, Noridian allowed only 128 of the 186 claimed miles after determining that the Phoenix hospital was not the nearest hospital with appropriate facilities. However, Noridian incorrectly paid the 128 miles at an air ambulance mileage rate instead of a ground ambulance mileage rate. As a result, Native Air was overpaid $2,845. PATIENTS TRANSPORTED BEYOND THE NEAREST HOSPITAL WITH APPROPRIATE FACILITIES Medicare Billing Requirements The Medicare Benefit Policy Manual, chapter , states, A patient transported from one hospital to another hospital is covered only if the hospital to which the patient is transferred is the nearest one with appropriate facilities. Coverage is not available for transport from a hospital capable of treating the patient because the patient and/or the patient s family prefer a specific hospital or physician. 4

13 Chapter of the manual states that if the air transport was medically appropriate, but the patient could have been treated at a nearer hospital than the one to which he or she was transported, payment is limited to the rate for the distance from the point of pickup to the nearer hospital. Further, chapter of the manual states, ambulance service to a more distant hospital solely to avail a patient of the service of a specific physician or physician specialist does not make the hospital in which the physician has staff privileges the nearest hospital with appropriate facilities. The fact that a more distant institution is better equipped, either qualitatively or quantitatively, to care for the patient does not warrant a finding that a closer institution does not have appropriate facilities. Patients Not Transported to Nearest Hospital Native Air submitted 14 claims for air ambulance services beyond the nearest hospital with appropriate facilities. As a result, Native Air was overpaid $7,744. For example, Native Air submitted one claim for air transport and related mileage of 149 miles for a patient with congestive heart failure. The flight was from a hospital in Lake Havasu City, AZ, to a hospital in Phoenix, AZ. The Patient Flight Record stated the reason for the flight as higher level of care with cardiac intervention. The Consent for Transportation, Treatment, Operations and/or Anesthetics form completed by a Native Air crewmember indicated that the hospital in Phoenix was the closest appropriate hospital for cardiac intervention. However, the Noridian medical review staff determined that the closest hospital with appropriate facilities to treat the patient s condition was in Las Vegas, NV, a distance of 128 miles from the Lake Havasu hospital. Consequently, Native Air was overpaid for the difference of 21 ( ) miles. LACK OF ADEQUATE CONTROLS Native Air did not have adequate controls to ensure that only medically appropriate air transport was billed to Medicare. It also did not have adequate controls to ensure that air transport was billed for the mileage to the nearest hospital with appropriate facilities or that documentation in the medical records supported the reason for transporting patients beyond the nearest hospital with appropriate facilities. Native Air officials stated that the referring physicians, not its crewmembers, made the decisions to transport patients by air ambulance. During CY 2002, Native Air used the form Documentation of Medical Necessity for Air Transport to allow referring physicians or nurses to select reasons for requesting air transport from a predetermined list. (See Appendix B for a sample of the form.) Native Air also kept copies of patient transfer records obtained from referring hospitals. The referring physicians used the transfer records to indicate reasons for and modes of transport. Other than obtaining copies of the medical necessity form or the transfer record, Native Air did not have any other procedures for confirming whether a patient s condition met the medical appropriateness criteria for air transport before billing Medicare. 5

14 Native Air officials also stated that referring physicians selected the hospitals to which patients were transported. Native Air used the form Consent for Transportation, Treatment, Operations and/or Anesthetics to document the reason for not transporting a patient to the closest hospital. However, for the 14 claims, the reasons given on the form were not sufficient to allow the mileage as billed. Other than requiring its crewmembers to document the reasons, Native Air did not have written procedures for verifying whether the destination hospital was the nearest hospital with appropriate facilities when billing Medicare. It also did not have procedures for confirming that documentation in the medical records supported the reason for transporting patients beyond the nearest hospital with appropriate facilities. CONCLUSION Of 100 randomly selected air ambulance claims, 15 claims did not meet Medicare billing requirements. As a result, we determined that $10,589 of the $330,713 reviewed was unallowable. We projected the results of the unrestricted random sample to the population and are 95-percent confident that at least $62,408 of the $3,968,759 paid to Native Air for air ambulance claims for CY 2002 was unallowable for Medicare reimbursement. RECOMMENDATIONS We recommend that Native Air: refund to the Medicare program $62,408 in overpayments for air ambulance services, strengthen policies and procedures to ensure that only medically appropriate air transport services are billed to Medicare, and strengthen policies and procedures to ensure that air transport services are billed for the mileage to the nearest hospital with appropriate facilities and that documentation in the medical records supports the reason for transporting patients beyond the nearest hospital with appropriate facilities. NATIVE AIR S COMMENTS AND OFFICE OF INSPECTOR GENERAL S RESPONSE In written comments on our draft report, Native Air disagreed with our findings and recommendations. Native Air s comments are summarized below and included in their entirety as Appendix C. Medically Inappropriate Air Ambulance Service Native Air s Comments Native Air disagreed with our finding that one claim was for a medically inappropriate service. It stated that the physician determined the medical appropriateness of air transport based upon the medical information available at the time of the transport. The 85-year-old female patient had a femur fracture, an emergent injury that could result in significant complications if the 6

15 patient was transported by ground ambulance. It further stated, Air ambulance transports are emergency services ordered by medical decision-makers who are in the best position to know whether a patient s current condition medically warrants the type of transport. Therefore, Native Air was not in a position to look behind the physician s decision to determine whether, in fact, the transport was medically necessary. Office of Inspector General s Response We based our finding on the Medicare billing requirements for air ambulance services and the medical reviews performed by Noridian. Noridian s reviews were based on documentation in the medical records provided by Native Air and by pickup and destination facilities for certain claims. The Medicare Benefit Policy Manual, chapter 10.4, states that Medicare contractors, including carriers, approve claims only if the beneficiary s medical condition is such that transportation by either basic or advanced life support ground ambulance is not appropriate. Specifically, chapter of the manual states, In order to determine the medical appropriateness of air ambulance services the contractor will request that documentation be submitted that indicates the air ambulance services are reasonable and necessary to treat the beneficiary s life-threatening condition. Further, chapter of the manual states, In all cases, the appropriate documentation must be kept on file and, upon request, presented to the carrier. It is important to note that neither the presence nor absence of a signed physician s order for an ambulance transport necessarily proves (or disproves) whether the transport was medically necessary. The ambulance service must meet all program coverage criteria in order for payment to be made. Before our review, medical reviewers in Noridian s Appeals Department evaluated Native Air s documentation for the one claim and determined that the air transport was not medically appropriate. The documentation showed that the 85-year-old patient was stable at the time of the transport. During our review, Noridian confirmed that its original determination was correct. Then, after receiving Native Air s comments, we requested that Noridian reevaluate the claim. Another medical reviewer in the Noridian Appeals Department reevaluated the claim and also determined that the 85-year-old patient could have been safely transported by ground to a facility that had available orthopedic surgery services. The presence of a signed physician s order does not prove that the transport was medically necessary. Patients Transported Beyond the Nearest Hospital With Appropriate Facilities Native Air s Comments Native Air disagreed with our finding that 14 claims were for transporting patients beyond the nearest hospital with appropriate facilities. It stated that the practice during CY 2002 was to rely 7

16 on the medical judgment of the physician or other trained personnel that the receiving hospital was the closest one with appropriate facilities to provide the necessary care. Native Air also stated that it assumed that the sending facility or physician had determined that the appropriate medical specialists or beds were not available at a closer facility. Native Air stated that its flight crews had neither the training nor the legal authority to challenge physician orders. Office of Inspector General s Response We based our finding on the Medicare billing requirements for air ambulance services and the medical review performed by Noridian. Noridian s review was based on documentation in the medical records provided by Native Air and by the pickup and destination facilities for certain claims. The medical reviewers examined the medical records and determined that the patients could have been transported to a closer hospital with appropriate facilities. No documentation in the medical records substantiated that the sending facility or physician had determined that the appropriate medical specialists or beds were not available at a closer facility. Lack of Adequate Controls Native Air s Comments Native Air disagreed that it did not have adequate controls to ensure that (1) only medically appropriate air transport was billed to Medicare and (2) air transport was billed for the mileage to the nearest hospital with appropriate facilities or that documentation in the medical records supported the reason for transporting patients beyond the nearest hospital with appropriate facilities. Native Air stated that, in CY 2003, it established controls to address the issues identified in our audit. It developed a written policy and procedure to ensure that only medically necessary claims are billed to Medicare. It also established procedures to identify that the destination hospital was the nearest appropriate facility and the medical record documentation supports the transport. Native Air stated that it provides regular education and training to all crew, clinicians, coders, and billers on its policies and procedures. Office of Inspector General s Response We reviewed Medicare claims for air ambulance services provided during CY 2002 and policies and procedures in existence at that time. We acknowledge that in 2003, Native Air developed new policies and procedures in an effort to comply with Medicare requirements. However, we did not validate whether the new policies and procedures were implemented because we reviewed Medicare claims for air ambulance services provided during CY

17 APPENDIXES

18 APPENDIX A SAMPLE RESULTS AND PROJECTION Population Sample Errors Items: 1,219 Items: 100 Items: 15 Payments: $3,968,759 Payments: $330,713 Payments: $10,589 Projection of Sample Results (at the 90-Percent Confidence Level) Point Estimate: $129,085 Lower Limit: $62,408 Upper Limit: $195,762

19 APPENDIX B NATIVE AIR FORM FOR DOCUMENTATION OF MEDICAL NECESSITY

20 APPENDIX C Page 1 of 10

21 APPENDIX C Page 2 of 10

22 APPENDIX C Page 3 of 10

23 APPENDIX C Page 4 of 10

24 APPENDIX C Page 5 of 10

25 APPENDIX C Page 6 of 10

26 APPENDIX C Page 7 of 10

27 Enclosure A APPENDIX C Page 8 of 10

28 APPENDIX C Page 9 of 10

29 Enclosure B APPENDIX C Page 10 of 10

30 ACKNOWLEDGMENTS This report was prepared under the direction of Lori A. Ahlstrand, Regional Inspector General for Audit Services, Region IX. Other principal Office of Audit Services staff who contributed include: Jerry McGee, Audit Manager Yun (Jessica) Kim, Senior Auditor Dennis Ensminger, Auditor Technical Assistance Steven Wong, Advanced Audit Techniques For information or copies of this report, please contact the Office of Inspector General s Public Affairs office at (202)